The Paycheck Protection Program (PPP)
is a loan program run by the United States Small Business Administration (SBA) that helps businesses keep their workforce employed during the Coronavirus (COVID-19) crisis. Please note that this information is subject to change frequently, so check the SBA's website
for additional information.
On Monday, February 22, the White House announced recent changes to the application process and criteria that may impact your business:
- If your business is a sole-proprietor or employs fewer than 20 employees, now is a great time to apply
- Starting Wednesday, February 24, 2021 through Tuesday March 9, 2021, the SBA is only accepting PPP applications from businesses with fewer than 20 employees
- Full-time, part-time, or seasonal employees each count as one employee
- If you are a sole proprietor, you may use a new formula to calculate your loan amount, which may allow you to qualify for a larger loan
- Businesses that file a IRS Form 1040 Schedule C will be able to calculate the PPP loan amount using gross income (instead of net profit)
- The SBA will create a new application with the updated calculation
- Note: this change is being finalized by the SBA
- The SBA also changing criteria for:
- Business owners that have student loan debt delinquency and;
- Business owners who are not citizens but are lawful US Residents and use an ITIN to file taxes
- Note: these changes are being finalized by the SBA
As a reminder, applications for PPP end on March 31, 2021.
The PPP is a forgivable business loan, meaning you may not need to pay it back. The first round of funding ran out fast, and many businesses who were not prepared ahead of time were unable to successfully apply for funding. The PPP is offered by SBA-approved lenders who each have their own application process. Below are some tips to help you prepare to apply as quickly as possible.
1. Apply with an SBA-approved PPP Lender
View a list of Community Development Financial Institutions (CDFIs) offering PPP loans.
2. Get your questions answered
3. Prepare your documents.
Each lender may have different requirements, but you can begin collecting some commonly required documents, including:
- Copy of Photo ID for all owners who own 20% of the business or more
- 2019 and 2020 Profit and Loss Statements to show revenue loss during 2020
- 2019 Business Tax Returns
- Articles of Incorporation / Business Organizational Documents
- Payroll Reports with a list of gross wages, paid time off, and taxes assessed for all employees for all 12 months of 2020
- 2020 Employer IRS Documents (including the following for all of 2020):
- Form 941: Employer’s Quarterly Federal Tax Return and Form 940 Employer's Annual Federal Unemployment (FUTA) Tax Return; or
- Form 944: Employer’s Annual Federal Tax Return (for smallest employers); or
- Form W-3: Transmittal of Wage and Tax Statements
- Documentation to support Health Insurance and Retirement expenses incurred as a part of payroll expenses (for example: a statement from insurance or retirement company).
We recommend getting your business paperwork in order as soon as possible so you are ready to apply.
4. Determine how much you can apply for:
If this is your first PPP loan:
- You can apply for up to $10 million or 2.5 times your monthly payroll, whichever is less
- You must have 500 employees or fewer
If this is your second PPP loan:
- You can apply for up to $2 million or 2.5 times your monthly payroll, whichever is less – if you are a restaurant or a hotel, you can apply for 3.5 times your monthly payroll up to $2 million.
- You must show proof of 25% economic loss in at least one quarter during 2020
- You must have used your first PPP loan for authorized uses by the time you receive your second PPP loan
- You must have 300 employees or fewer
For both first and second PPP loans:
- Loans will be forgiven (meaning you do not need to pay them back) if you meet the SBA’s criteria: 1) maintain employee and compensation levels and 2) use your funds them for eligible expenses, including at least 60% for payroll expenses and no more than 40% for other eligible operating expenses. Other eligible expenses include:
- Mortgage interest payments
- Interest payments on other debt incurred before February 15, 2020
- Payments for any business software or cloud computing service
- Property damage costs
- Essential supplier costs
- Worker protection expenditures (including personal protective equipment (PPE), expansion of indoor or outdoor business space, etc.)
- Your business must have been in operation since on or before February 15, 2020